Low home loan rates and discounts have pushed sales velocity and this has helped perk up sentiment, says the 26th Knight Frank - FICCI - NAREDCO Real Estate Sentiment Index Q3 2020 Survey
The real estate sector is on a path to revival with residential sales volumes increasing to 55 percent in the July to September quarter. Low home loan rates and discounts have pushed sales velocity and this has helped perk up sentiment.
The ‘Future Sentiment Score’ for Q3 2020 is in the optimistic zone at 52 points, up from 41 in the previous quarter. The ‘Current Sentiments Score’ (for past six months) also recorded a significant improvement from the previous quarter low of 22 points to 40 points in Q3 2020, says the 26th Knight Frank - FICCI - NAREDCO Real Estate Sentiment Index Q3 2020 Survey.
The survey sample comprises developers, banks, financial institutions and private equity players operating in the sector.
A score of above 50 signifies ‘Optimism’ in sentiments, a score of 50 means the sentiment is ‘Same’ or ‘Neutral’, while a score below 50 shows ‘Pessimism’.
The Current Sentiment Score in Q3 2020, jumped to 40 from a record low of 22 in Q2 2020. The impact of the ongoing pandemic and the stringent lockdowns on businesses became more apparent in Q2 2020 when market sentiments dipped and hit an all-time low score of 22.
With partial restoration of business activity and improvement in macroeconomic indicators in Q3 2020, stakeholder sentiments for the real estate sector have revived substantially and resulted in a Current Sentiment score of 40 for Q3 2020, it said.
The Future Sentiment Score of the stakeholders has climbed up to 52 in Q3 2020 from 41 in Q2 2020, moving into the optimistic zone for the first time in 2020. In Q3 2020, residential launches and sales bounced back from the COVID-induced decline, across cities.
The office sector also resumed operations, at varying occupancies across markets as occupiers took steps to ensure continuity in business operations to their highest potential. These developments have turned the stakeholder outlook on real estate sector to optimism, as reflected in the Future Sentiment score of Q3 2020, it said.
In Q3 2020, the residential sector bounced back with a healthy recovery in demand and supply. With respect to supply, almost half of Q3 2020 survey respondents, up from 23% in Q2 2020, opined that new project launches will increase in the next six months.
On the demand front, the share of respondents expecting an increase in sales activity over the next six months more than doubled this quarter, as it increased from 31% in Q2 2020 to 66% in Q3 2020.
As any as 40% of the survey respondents in Q3 2020 opined that prices would increase in the next six months while 38% opined that they would remain at current levels.
“Even while the volumes are yet to catch up to the pre-Covid levels, the spurt has been instrumental in perking up sentiments. Similar positivity is visible for the office sector as well, where we have seen a revival of leasing activities,” said Shishir Baijal, chairman and managing director of Knight Frank India.
“The return of the end -users in the market, especially in the residential segment is a matter of cheer for the entire sector, as it indicates economic confidence and long-term commitments. The festive season in Q4 2020 is likely to further support the revival in real estate sector. We are hoping that the government and allied agencies will encourage this growth with more supportive decisions,” he said.
The stakeholders in all four zones have shown significant surge in future sentiments (next six months) for the real estate market. The Future Sentiment Index for South and North zones have seen maximum improvement in Q3 2020.
The South zone score jumped to 65 in Q3 2020 from 42 in Q2 2020 whereas the North region score jumped to 55 in Q3 2020 from 38 in Q2 2020. At the same time, the East zone score has improved to 50 in Q3 2020 from 40 in Q2 2020. For West zone, the score remains in the pessimistic zone at 47 in Q3 2020,though up from 38 in Q2 2020.
The funding outlook also improved in Q3 2020. As many as 38% of Q3 2020 survey respondents, up from 25% in Q2 2020, opined that the scenario would be better in the coming six months while 31% of the survey respondents felt that the current levels of credit availability would continue for the next six months.
With regards to office leasing activity expectation in Q3 2020, 47% of the survey respondents expect leasing activity to increase in the next six months, a significant increase over the 27% respondents with the same opinion in Q2 2020.
On office rentals, 62% of the Q3 2020 survey respondents, up from 46% in Q2 2020, opined that office rentals would either increase or continue to stay at current levels, for the next six months, it said.